Once it is established that an exclusion clause is incorporated, the whole contract will be construed to see whether the clause covers the breach that has occurred. If there is ambiguity as to the meaning of an exclusion clause the courts will construe it contra proferentem (against the party who put it into the contract) in Houghton v Trafalgar Insurance “excess load” could have meant extra weight but the meaning of extra people was taken.
Under the main purpose rule the courts can strike out an exemption clause, which is inconsistent with the contract.
Under the doctrine of fundamental breach, prior to 1964 the law considered that a fundamental breach could not be excluded or restricted in any circumstances as this would amount to giving with one hand and taking with the other, however this approach was rejected in UGS Finance v National Mortgage Bank of Greece on the basis that it conflicted with freedom of contract.
The unfair contract terms 1977 has now been introduced to restrict the extent to which liability in a contract can be evaded.
Once there has been an offer the offeree must then accept it in order for the contract to be formed.
Acceptance is defined as the unconditional assent from the offeree to the offeror accepting the exact terms of the offer without introducing any new terms. In the case of Hyde v wrench a farm was offered for £1000 but the offeree came back with an offer of £950 which was rejected, this is known as a counter offer and all previous offers will no longer stand.
Acceptance must also be communicated otherwise the contract will not be effective, in
Entores v Miles Far East Corp Lord Denning stated that if a man shouts an offer to a man across a river but the reply is not heard because of a plane flying overhead, there is no contract. The offeree must wait and then shout back his acceptance so that the offeror can hear it.
The offeror cannot impose a contract on the offeree against his wishes by deeming that his silence should amount to an acceptance as illustrated in Felthouse v Bindley , and if the method of communication is instantaneous, for example telephone, then the contract will be formed when and where acceptance is received.
There are however certain exceptions to the communication rule. In a unilateral offer acceptance does not have to be communicated, as performing the said act will be sufficient, as in the case of
Carlill v Carbolic Smoke ball Company, in which by using the product they had accepted. Communication can also be waived in a bilateral contract, either expressly or impliedly as in Anglia television v Cayton. And lastly the postal rule, where acceptance has been made by post the contract will come into being as soon as the letter has been posted regardless of whether it is destroyed or damaged along the way as in Co v Grant where he was still deemed to be a shareholder even though he never received the letter of allotment of shares.
The postal rule will not apply if the letter has not been posted correctly as in London and Northern bank v Royal Trust co where instead of the letter being posted it was handed to the postman. If the letter has not been addressed properly, if the terms of the offer exclude the postal rule in Holwell Securities v Hughes it was ruled that “notice in writing” meant actual communication was required, and lastly if it is inappropriate to use the post.
Millennium Ltd has not stated a method of communication nor has there been any form of acceptance on behalf of Kensal Homes. On the 25th of March Kensal Homes placed an order for 95 panels this is now a counter offer as the exact terms of the initial offer have not been accepted and new terms have been introduced, the first offer is now void as in the case of Hyde v Wrench, Kensal Homes have also added their own terms to this offer and stipulated a method of communication, which is to sign and return the slip at the end of the document.
On the 6th of April Millennium signed and returned the slip, this means that they have accepted Kensal Homes offer and have entered into a contract with them. After delivering the first 50 panels they informed Kensal Homes of a 12% price increase, which they refused to pay.
Kensal Homes is not bound to pay the price increase as this clause was entered into the initial offer but when Kensal Homes only ordered 95 panels the first offer no longer stood including its clauses. And by returning the tear off slip Millennium has agreed to the terms in the offer made by Kensal Homes.
Even if Millennium had pointed out the clause in the first offer stating that the price could increase it would not make any difference as they have accepted the counter offer and the first offer has been made void.
Once an offer has been accepted it forms a legally binding contract and cannot be terminated, but before acceptance an offer may be terminated in the following ways; firstly it can be revoked, an offer can be revoked by the offeror at any time until it has been accepted, but it must be communicated, in
Byrne v Van Tienhoven the offer was revoked before acceptance but revocation was not received until after it had been accepted the courts ruled that this was too late and the contract was valid, a unilateral offer cannot be revoked once performance has commenced in Errington v Errington a fathers promise was seen as a unilateral contract if the mortgage was paid, which it was.
An offer will lapse if it is open for a specific length of time and that time limit expires. Where there is no express time limit, an offer is normally open only for a reasonable time, in Ramsgate v Montefiore the 6-month gap between the offer and acceptance was said to have lapsed the offer.
An offer may be made subject to conditions; if the condition is not satisfied the offer is not capable of being accepted, as illustrated in Financings Ltd v Stimson.
The offeree cannot accept an offer after notice of the offeror's death. However, if the offeree does not know of the offeror's death, and there is no personal element involved, then he may accept the offer.
Had Millennium not signed and returned the slip then there would be no contract as the sending of the slip was acceptance of the offer. If they hadn’t returned it, it would have been treated as a rejection, whereby cancelling all offers or they could have made a new offer to Kensal Homes with there own terms contained in the offer, it is, however, up to Kensal Homes to show that the exclusion clause formed part of the contract as they are the ones relying on it, but they do have signed documents to show, in L'Estrange v Graucob Scrutton LJ said “when a document containing contractual terms is signed…. the party signing it is bound…”
Kensal Homes have entered a clause into the contract stating that if they require further panels they must be supplied within 7 days and at a price agreed by both parties and if a price cannot be agreed then an arbitrator will decide. First of all if Kensal Homes require more panels then they would have to be supplied as Millennium have agreed to their offer, they have also agreed to an arbitrator deciding the outcome if they cant reach an agreement. The decision of the arbitrator would be binding on both parties if they had to agree a price for them.
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Bibliography
Cases
- Carlill v Carbolic Smoke Ball Company 1892
- Payne v Cave 1789
- Fisher v Bell 1960
- Houghton v Trafalgar Insurance 1953
- UGS Finance v National Mortgage Bank of Greece 1964
- Hyde v wrench 1840
- Entores v Miles Far East Corp 1955
- Felthouse v Bindley 1862
- Anglia Television v Cayton
- Co v Grant 1879
- London and Northern bank v Royal Trust co 1900
- Holwell Securities v Hughes 1974
- Byrne v Van Tienhoven 1880
- Ramsgate v Montefiore 1866
- Financings Ltd v Stimson 1962
- L'Estrange v Graucob 193
Statutes
- S57 (2) of the sales of goods act
- The Restriction of Offensive Weapons Act 1959
- The Unfair Contract Terms Act 1977
- The Unfair Terms in Consumer Contracts Regulations 1999
- The unfair contract terms 1977
Books
- Smith, J.C. Smith & Thomas: A case book on Contract (eleventh Edition). London. Sweet & Maxwell. 2000.
- McKendrick, E. Contract Law (Fourth Edition). Palgrave law masters.
- McKendrick, E. Contract Law Text, Cases and materials (second edition). Oxford. OUP
- Halson, R. Contract Law. University of Hull. Longman Law series. 2001
- Martin, J & Turner, C. Contract Law. Hoder Arnold. Second edition
Websites
-
Carlill v Carbolic Smoke ball company 1892
S57 (2) of the sales of goods act
The Restriction of Offensive Weapons Act 1959
The Unfair Contract Terms Act 1977
The Unfair Terms in Consumer Contracts Regulations 1999.
Houghton v Trafalgar Insurance 1953
UGS Finance v National Mortgage Bank of Greece 1964
The unfair contract terms 1977
Entores v Miles Far East Corp 1955
Anglia Television v Cayton
London and Northern bank v Royal Trust co 1900
Holwell Securities v Hughes 1974
Byrne v Van Tienhoven 1880
Ramsgate v Montefiore 1866
Financings Ltd v Stimson 1962
L'Estrange v Graucob 1934
